In the last few months there was the dramatic improvement in the balance sheet of Northwest Biotherapeutics (NWBO). On September 26, the stock went through a reverse 16:1 stock split and the company announced that it planned to raise up to $25 million through an equity offering. On December 7, 2012, it completed a stock and warrants offering to purchase up to an aggregate 1,500,000 shares of common stock, at an offering price of $4.00 per share. The shares and warrants are traded on the NASDAQ Capital Market. This offering brought $13.8 million. As or more importantly, the company has been able to recapitalize its balance sheet by issuing equity or cash for all convertible notes, all notes payable and most accrued short term operating expenses. All that is left is a small amount of trade payables needed for support of the ongoing clinical trials. The company thus has reduced outstanding short- and long-term debt from about $39 million at the end of third quarter of 2012 to $2-$3 million by the end of fourth quarter of 2012. On December 18th management rang the opening bell to celebrate NWBO's listing on NASDAQ.
Investors always worry about being diluted by equity offerings. However, for a development stage biotechnology company with a significant burn rate necessitated by the conduct of clinical trials, this is inevitable. Raising money is not a bad thing for shareholders if it creates value and in the case of NWBO this is definitely the case as it will be spent on the Phase III clinical trial of DCVax-L. What investors must consider is that management's interests are in line with shareholders. If management owns little of the stock, their primary interest may be in getting as much money as possible for clinical trials to get more shots on goal (even if they are not good shots) and to pay their salaries. In the case of Northwest, the CEO Linda Powers and entities affiliated with her own over 40% of the stock so that her interests are aligned with shareholders. Another 20% is owned by parties who have participated in the financings since 2007 and have close ties to management.
Through a series of misfortunes which are not unprecedented with small biotechnology companies, Northwest throughout the last eight years has been an undercapitalized company whose bulletin board status created great problems in raising capital and attracting quality investors. Since 2007, it has gone through a series of "near death" experiences. It was living from quarter to quarter with cash balances that could fund only one or two quarters of operational cash burn. With capital from the equity markets unavailable, the company was only kept alive because of investments from the company's CEO Linda Powers, venture capital funds controlled by her and non-traditional investors. Without her belief in the company and willingness to invest her own money, there is a high probability that Northwest would have gone out of business.
In the last few months, Northwest Biotherapeutics expanded to Europe. It selected a leading international contract research organization (CRO) - PAREXEL International Corporation (PRXL) - to manage 312-patient Phase III clinical trial for Glioblastoma multiforme (GBM) brain cancer in Europe. Over the past 30 years, PAREXEL has developed significant expertise in oncology, including glioblastoma. Headquartered near Boston, Massachusetts, it operates in 71 locations throughout 54 countries around the world, and has over 14,000 employees. The trial is poised to begin enrolling patients in the United Kingdom later in this quarter and elsewhere in Europe in the next several months. In the United Kingdom preparations, the Phase III trial includes regulatory approval by the Medicines and Healthcare Products Regulatory Agency (MHRA - equivalent to the FDA), nationwide Ethics Committee approval (equivalent to Institutional Review Board approvals in the U.S.), selection and qualification of the first four trial sites (major opinion leader centers), institutional reviews and approvals at the lead site, Kings College Hospital, and manufacturing technology transfer and validation in the United Kingdom.
In Germany, preparations for the Phase III trial completed by Northwest Biotherapeutics include the establishment of a wholly owned subsidiary (NW Bio GmbH), as well as selection of 24 candidate trial sites. The expected reporting of Phase III topline results from this pivotal trial Phase III trial of DCVax-L in the first half of 2014 is the most critical upcoming event for the company. There have been a number of patients who have received DCVax-L on a compassionate use basis in the U.S., Israel and Europe, some of whom have been on the drug for several years. The reports are expected in the second half of 2013. The German drug regulatory agency equivalent of FDA could approve the Phase III trial and use of DCVax-L and the German equivalent of the Center for Medicare & Medicaid Services (or CMS) could issue reimbursement guidance for use of DCVax-L in the first quarter of 2013. This should follow by half a year of manufacturing technology transfer and a 2-year regulatory process for manufacturing the drug in Germany. In addition, enrollment for the trial of the company's third cancer vaccine product, DCVax Direct will start in March 2013, and the trial itself should commence in the second half of 2013.